A survey by the National Retail Federation in 2018 showed that retailers reported a median return rate of 10 percent. This equates to $369 billion in sales that were made and then lost.
Legitimate returns are expensive for retailers — labor, overhead, and opportunity costs all impact performance. Added to these necessary returns, return fraud and return abuse hit hard.
According to the 2018 Consumer Returns in the Retail Industry Report issued by Appriss Retail, return fraud and abuse now costs U.S. retailers $5.00 to $6.50 for every $100 returned. In aggregate, return fraud costs U.S. retailers $18.4 billion, and when return abuse (i.e., wardrobing/renting) is factored in, the value rises to $24 billion. Retailers could do many things with that lost revenue, including hiring up to 789,600 more employees.
Staggering as these statistics may be, returns have a positive side.
Surprise! 'Best' Customers Make Returns
The $24 billion lost to return fraud and return abuse can be traced back to only 1 percent of consumers and to a fraction of employees. The rest of the returns are made by consumers who are willing to make many more purchases if they're treated with lenience and kindness instead of suspicion. You see, even though about 80 percent of consumers don’t make any returns, they still consider the return policy when they make a purchase. It's their “insurance policy” against defective merchandise or a poor decision.
Retailers, too, are investing in their own “insurance policy” in the form of artificial intelligence (AI). It allows the retailer to create a friendly return policy that reduces strict rules and limits. It allows the retailer to welcome “good” and “best” customers’ returns while keeping return abuse and return fraud in check.
Making Buy Online, Return In-Store More Profitable
The convenience of being able to buy online, return in-store (BORIS) has become an expectation among consumers, and the e-commerce team loves the boost it brings to its sales. However, the value of the return often impacts store performance statistics as lost revenue.
What can be done? Along with making sure the return transaction is fast and accurate, stores can treat the return as a customer service moment to shine, an opportunity to develop a relationship with consumers from every channel. With attentiveness, lost sales can be recaptured. A known shopper may be interested in a new shipment just put on display. Perhaps the e-commerce shopper isn't familiar with the store floor plan and needs personal assistance to find a replacement item.
The returns desk offers retailers an opportunity to interact with their customers in a more engaging way. Why not take the opportunity to build a relationship that spans all channels?
Tom Rittman is the vice president of marketing at Appriss Retail, a SaaS platform providing artificial intelligence-based solutions to help retailers protect margin, unlock sales, and cut shrink.